The BBC's iPlayer is setting the pace for online video, embracing the latest technologies while also navigating sticky issues such as digital rights management and bandwidth consumption by viewers.

The iPlayer, which is only available to U.K. users, debuted in July 2007 as a stand-alone application for only Windows PCs that could download programs from the previous seven days via P-to-P (peer-to-peer) file sharing.

But over the last 10 months, the iPlayer has seen major upgrades to the way it can deliver video, video quality and compatibility with an ever-expanding number of mobile devices, putting the iPlayer on the forefront of Internet video delivery. The BBC is solving many of the problems with online video delivery that have vexed other services around the world.

"We are going to be putting a lot of research and development into this," said Anthony Rose, head of the BBC's digital media technology and former CTO of Kazaa, a P-to-P file-sharing service that rankled the music industry. "I hope we'll be a real leader in this area."

Last December, the iPlayer began streaming BBC content in Flash video files at 500K bps (bits per second). Flash video offers instant gratification: PC users only need Flash installed in their browser, and the video starts playing nearly immediately. The iPlayer P-to-P client isn't needed, although users can still use it to download a show to their hard drive.

Last month, the BBC started encoding shows using H.264 compression, which offers better-quality video that streams at 800K bps, plus a better sounding audio track in the AAC+ format.

The video upgrade was made possible by two other advances: Most people are using the latest version of Flash player supporting H.264, Rose said. Also, one of the BBC's partners, Level 3 -- a company that specializes in distributing online video to ISPs (Internet service providers) -- started supporting H.264.

But the higher data stream means people use more data, which has caused ISPs to complain that the iPlayer was putting undue stress on their networks.

By the end of the year, however, the BBC hopes to begin using variable-bit encoding systems, Rose said. The systems encode video in a way that preserves the highest quality but uses the least amount of data possible. For example, in slow moving or static video scenes, less data is needed. Those scenes would be encoded at a lower bit rate, while fast-moving scenes would be encoded at a higher rate.

"We are going to see the rise of quite sophisticated systems that analyze the video as it is processing," Rose said.

ISPs spend less money transmitting the video, and users also use less data, which could save them money, he said. Some ISPs had called for the BBC to compensate them as a result of widespread use of the iPlayer.

Rose said YouTube remains more popular than the iPlayer, and there's high demand for video across the Web. That demand is the cause of the "short-term pain between a network built for today and market opportunities that will be there tomorrow." Network providers will catch up, he said.

The BBC is also grappling with DRM (digital rights management) issues. The broadcaster buys some programs from other networks, many of which are still nervous about piracy and want to mandate a specific DRM technology. Usually, that's been Microsoft's Windows Media system. The BBC also uses it to ensure its programs don't end up on file-sharing networks, although Windows Media has been hacked before.

But the BBC encodes video into some 20 different formats for PCs and mobile devices, some of which are not compatible with certain DRM systems. The BBC has a server farm with more than 50 rack-mount PCs running quad-core Intel Xeon processors to encode hundreds of hours of programming a week.

IPlayer clients will soon be available for an upcoming Sony Walkman product, a Philips Gogear device and Nokia's N96 phone, Rose said.

"You can't mandate a particular technology because it's just not possible across the platforms we cover," Rose said. "Really the goal going forward is to change the relationship with content owners."

That goal to ensure content isn't easily pirated, but gives the BBC the leverage to make the decision on what DRM to use. Piracy will always exist, but "my job is to make it so easy to use legally that you wouldn't bother hacking it," Rose said.

Flash versions of a program can't be saved. With the iPlayer P-to-P client, a downloaded program will stay on a PC for 30 days before it's unplayable. Once someone starts watching a program, it will stay on a PC for seven days.

In June, the BBC introduced iPlayer 2.0, a Web site redesigned to make it easier for people to find content. It introduced a list of the top 10 programs, as well as remembers a user's last watched programs in order to show new episodes when someone goes to the iPlayer site again. It also streams BBC radio programs.

But much more is on the way. Soon, the iPlayer will automatically detect a PC's broadband speed and serve up either higher or lower bitrate streams to ensure the smoothest viewing, Rose said.

In the coming months, iPlayer users will also soon see social-networking features that will allow people to share and rate programs they like and get recommendations from other people with similar interests. Users will also be able to create accounts on the site.

"Last year, the BBC chose what you watched," Rose said. "This year, you choose what you want, and next year your friends will help you pick what you want to watch."

To comment on this article and other PCWorld content, visit our Facebook page or our Twitter feed.